PP 7767/09/2010(025354)

Malaysia Corporate Highlights

RHB Research
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

R e su l ts N o t e
MARKET DATELINE

1 March 2010

PMB Technology Share Price

Fair Value
:
:
RM0.45
RM0.62
FY09 Earnings Declined, But 4Q09 Earnings Recom : Outperform
(Maintained)
Improved

Table 1 : Investment Statistics (PMBTECH; Code: 7172) Bloomberg: PMBT MK

Net Core EPS Net
FYE Turnover profit EPS EPS# Growth# PER# C.EPS* P/NTA Gearing ROE GDY
Dec (RMm) (RMm) (sen) (sen) (%) (x) (sen) (x) (x) (%) (%)
2009 212.7 5.2 6.4 6.4 -44.9 7.0 - 0.4 0.7 5.5 3.3
2010f 325.1 8.2 10.3 10.3 59.5 4.4 - 0.4 0.8 8.0 3.3
2011f 382.7 8.7 10.8 10.8 5.5 4.1 - 0.3 0.8 7.9 3.3
2012f 410.6 9.5 11.8 11.8 8.9 3.8 - 0.3 0.7 8.1 3.3
Main Market Listing /Trustee Stock / Non-Syariah-Approved Stock By The SC #Excluding EI * Consensus Based On IBES
E i

RHBRI Vs. Consensus

♦ Above expectations. PMB Tech recorded 4QFY12/09 net profit of √ Above
RM2.3m, bringing FY12/09 net profit to RM5.2m, accounting for 117.2% of In Line
our full year forecasts. The variance came largely from the higher-than-
Below
expected EBIT margin at both divisions, i.e. manufacturing and trading
divisions, as well as contruction and fabrication. Issued Capital (m shares) 80.0
Market Cap(RMm) 38.8
♦ YoY. FY12/09 core net profit declined by 25.9% from RM7.0m to RM5.2m Daily Trading Vol (m shs) 0.02
mainly due to: 1) Lower contribution from the construction and fabrication 52wk Price Range (RM) 0.30-0.60
division, where operating profit declined by 30.7% from a year ago; 2) Major Shareholders: (%)
18.9% yoy and 32.6% yoy decline in manufacturing and trading division Press Metal 26.8
sales and operating profit, respectively. Weng Fatt Stainless Steel 10.4

♦ Qoq. 4QFY12/09 core net profit improved by 25.2% qoq and 60.2% yoy, FYE Dec FY10 FY11 FY12
attributed to better construction and fabrication division’s operating margin EPS chg (%) 10.6 2.3 new
of 8.1% in 4Q09 vs. 4.5% in 3Q09 and 0.6% in 4Q08.
Var to Cons (%) n.a n.a n.a

♦ Dividend of 1.5 sen. The company has declared 0.75 sen final dividend in the PE Band Chart
quarter, bringing FY09 total dividend to 1.5 sen, in line with our expectation.
PER = 9x
This translates to net payout of 16.9%, or net yield of 2.5%. PER = 7x
PER = 5x
PER = 3x
♦ Future outlook. We expect PMBT’s earnings to improve in the near term,
underpinned by: (1) Pick-up in construction (on the back of the two
stimulus packages) and property development activities that will boost
orderbook at its construction and fabrication division that does aluminium
curtain wall and cladding system; and (2) Better margins at the
manufacturing and trading division given the rising aluminium prices.
Relative Performance To FBM KLCI

♦ Risks. The risks include: 1) weaker-than-expected margins for the

construction and fabrication division; and (2) lower-than-expected
orderbook for the construction and fabrication divisions. FBM KLCI

♦ Forecasts. We have raised our EBIT margin assumptions for: 1)

construction and fabrication division to 4% from 3.5% for FY10; and 2) PMB Technology
4.7-5.1% for FY10-11 from 4-4.9% previously, for the manufacturing and
trading division. Consequently, our FY10-11 earnings forecasts were raised
by 2.3-10.6% p.a.. We introduce our FY12 forecasts. Coverage Under CMDF-Bursa
Research Scheme
♦ Investment case. Following the earnings expansion, indicative fair value
is raised to RM0.62 based on unchanged 6x FY12/10 EPS of 10.3 sen, at Low Yee Huap, CFA
25% discount to our 1-year target forward PER of 8x for the manufacturing (603) 9280 2641
sector. Maintain Outperform. low.yee.huap@rhb.com.my

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Table 2: Earnings Review

QoQ YoY YoY
FYE Dec (RMm) 4Q08 3Q09 4Q09 12M08 12M09 Comments
(%) (%) (%)
Revenue 82.2 62.4 54.7 (12.3) (33.5) 321.6 212.7 (33.9) Yoy declined due to lower
revenue contribution across the
board.
- Manu. & trading 33.4 38.1 34.5 (9.5) 3.1 163.0 132.3 (18.9)
- Cons. & fabrication 48.8 24.3 20.6 (15.2) (57.8) 159.3 81.0 (49.2)
Operating profit 1.8 3.8 3.6 (7.4) 99.1 16.1 10.9 (31.9) Yoy declined due to: (1) The
absence of exceptional gain; and
(2) Lower contribution at both
divisions. 4Q09 yoy improved
due to better earnings
contribution at both divisions.
- Manu. & trading 1.5 2.8 1.9 (31.6) 26.8 10.7 7.2 (32.6)
- Cons. & fabrication 0.3 1.1 1.7 54.0 455.0 5.3 3.7 (30.7)
Finance cost (1.4) (0.8) (1.0) 22.9 (29.3) (5.0) (3.7) (26.2)
Associates 0.3 (0.4) 0.1 (116.0) (78.3) 0.2 (0.5) (368.6)
Pre-tax profit 0.7 2.7 2.7 (0.2) 269.1 11.3 6.8 (39.7) Yoy partly offset by lower
finance cost.
Tax 0.7 (0.9) (0.4) (54.0) (156.5) (1.9) (1.6) (14.3)
Minority interest (0.0) 0.0 (0.0) - - (0.0) (0.0) -
Net profit 1.4 1.8 2.3 25.2 60.2 9.4 5.2 (44.9) Filtered down from pretax profit.
Core net profit 1.4 1.8 2.3 25.2 60.2 7.0 5.2 (25.9) FY08 included RM2.4m
exceptional gain arising from the
disposal of a property

Margin (%)
2.2 6.2 6.5 5.0 5.1
Operating
0.9 4.3 4.9 3.5 3.2
Pre-tax
(96.4) 32.0 14.7 (17.0) (24.1)
Effective tax rate
1.7 2.9 4.2 2.9 2.4
Core net profit

Source: Company,
RHBRI

Table 3. Earnings Forecasts Table 4. Forecast Assumptions

FYE Dec (RMm) FY09 FY10F FY11F FY12F FYE Dec FY10F FY11F FY12F

Turnover 212.7 325.1 382.7 410.6 New contracts secured (RMm) 250 250 250
Turnover growth (%) (33.9) 52.8 17.7 7.3 Production capacity (tons) 6,000 6,000 6,000
Capacity utilsation rate (%) 65.3 67.2 69.2
EBIT 10.9 14.9 16.6 18.2
EBIT margin (%) 5.1 4.6 4.3 4.4

Net Interest (3.7) (4.4) (5.6) (6.1)

Associates -0.5 0.5 0.7 0.7
EI

Pretax Profit 6.8 11.0 11.7 12.8

Pretax Margins (%) 3.2 3.4 3.1 3.1
Tax (1.6) (2.7) (3.0) (3.3)
Minorities (0.0) (0.0) (0.0) (0.0)
Net Profit 5.2 8.2 8.7 9.5
Net Profit Margins (%) 2.4 2.5 2.3 2.3
Source: Company data, RHBRI estimates

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IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad
(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The opinions
and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or be contrary to
opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be construed as an offer,
invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any manner whatsoever and no
reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons may from time to time have an
interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of
persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate particular
investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or strategy will depend
on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts any liability for any loss or
damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing
investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB Group
may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity securities or loans of
any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or other services
from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based upon
various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more over
a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended securities,
subject to the duties of confidentiality, will be made available upon request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the
actions of third parties in this respect.

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